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Pa. lawmaker questions state's website contract

By MARC LEVY Associated Press

Updated:
03/26/2013 06:27:57 PM EDT

HARRISBURG, Pa.—A Pennsylvania lawmaker is questioning why Gov. Tom Corbett's administration awarded a no-bid contract to a firm to manage the state's website infrastructure and technology, and raises concerns that it would result in new fees being imposed on everyday transactions made by Pennsylvanians.

State Rep. Rob Matzie, D-Beaver, complained about the sole-source contract with a subsidiary of Kansas-based NIC Inc. in a letter to Attorney General Kathleen Kane and Auditor General Eugene DePasquale.

A spokesman for Corbett's Office of Administration said Tuesday the firm is the only company in the country that does what it does, making it unnecessary to open the contract to bidding.

But Matzie cited a statement by NIC in its 2013 annual report to investors that it faces "intense competition" in all sectors of its business. NIC also said in a Feb. 7 conference call with investors that the Pennsylvania contract was its first sole-sourced agreement in the history of the company, according to a transcript of the call.

The five-year Pennsylvania contract, effective Dec. 1, would pay NIC through fees that are to be imposed on optional, high-volume transactions initiated by businesses, such as insurance companies seeking driving records, the Office of Administration spokesman said. NIC has contracts with 28 other states, and a spokeswoman for the company would not discuss why the Pennsylvania contract was the only one that was a sole-source agreement.

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Instead, the company released a statement, saying it was comfortable with a sole-source agreement because of the state's "thorough research and legal justification process" and a period that was allowed for public comment.

Each state has its own unique procurement rules that NIC must follow in the contracting process, the company added.

The Corbett administration made no public announcement about the contract, which is on file with the state Treasury Department. The Office of Administration could not immediately say Tuesday how much money would be charged in fees, on which specific transactions the fees would be charged or how much of those fees would go to NIC.

It also could not say how much money the contract could save the state in costs related to updating and maintaining servers and software for a range of executive-branch agency websites. No state employees would be laid off as a result of the contract, Office of Administration spokesman Daniel Egan said.

Matzie said the 456-page contract appears to give NIC the right to do the credit card processing for new or existing electronic transactions for up to 10 years, potentially earning NIC hundreds of millions of dollars.

"This lucrative contract was awarded without giving any other company the opportunity to compete for that business," Matzie wrote in a letter dated Jan. 20.

Matzie also questioned whether the Corbett administration can legally impose new fees on transactions without legislative approval, and he said nothing in the contract prevents NIC and the Corbett administration from imposing new fees on every single transaction that residents have with state government every day.

In the Feb. 7 conference call with analysts, NIC's chief financial officer, Stephen Kovzan, said the company is "fast and furiously building our team" in Pennsylvania and that Pennsylvania began generating motor-vehicle revenue on Jan. 1.

NIC expects motor-vehicle revenue from Pennsylvania to range from $7 million to $7.5 million in 2013, with a first-year gross profit margin above 30 percent, Kovzan said, according to the transcript.

All told, NIC projected $232 million to $238.5 million in revenue in 2013, with net income ranging from $27 million to $29.6 million.